I need help with business debts

4 August 2017

Recognizing that you need help with business debts is the first step in ensuring that the business can survive. So often company directors believe that the problem will go away or is not really there. For instance they think the creditors will just not pursue the debt as they rely on our business, alternatively they notice sales are picking up and that the debt will go away. Directors can even be hopeful that a new project will take off.

Business people and entrepreneurs are often optimistic people and this is great to get businesses off the ground and convince people to invest in your product or service. However over optimism can get people into sticky situations. Most particularly debt can increase as sales increase. If the business is taking orders then it may have to increase costs before it gets money in from the customer. This can be in the form of increased PAYE liabilities or the cost of materials etc. When a business gets too far into debt when the sales pick up this is termed as "overtrading" and a cashflow crunch can derail the business.

In essence you can have business debts but not be insolvent. So it is a good idea to take our insolvency test and decide for yourself. Remember though that if you are owed money by debtors but you do not have the cash now to pay creditors then you are effectively insolvent and you need to take action.

So what action can you take to tackle the debt.It may be that you are owed money but can't collect it in quick enough. Factoring can sometimes help with this.

You can agree with a creditor to pay off the debt over an extended time period.

You can take action to have the debts written off in full or in part.

Once the business is insolvent it is a good idea to talk to a licensed insolvency practitioner who can advise you one what action to take. We are happy to talk through the options with company directors and can issue a 30 page solutions report.We can look at the various options

You will need to be mindful of any offers to lend the business more money as this might just add to the debt of the business without addressing the underlying problems.

If the company is viable going forwards at a reduced level of debt then in order to have any of the debts written off the company is likely to have to enter into a formal arrangement such as a company voluntary arrangement, Partnership Voluntary Arrangement or a Pre pack. It is possible to have an informal arrangement with creditors but it tends to work where there is just one or two creditors, most notably HMRC. Where there are lots of creditors a formal process ensures a degree of control over the process.If some creditors become particularly aggressive in collecting a debt such as issuing a winding up petition it can have serious consequences.

Worried about poor cashflow? How to win new work? How to pay wages on pay day? For expert advice on a range of issues download our free Ultimate Guide For Worried Directors today. Or just call us on 0800 9700539

"KSA Group which owns this site, will help you fix problems in your business. We won't charge for any initial advice or face to face meetings. We speak in English. We will save you money and your precious time. You can come to any of our offices

"We also follow up any meeting with a full "solutions report" which runs on average to 30 pages valuable free advice!! No other practitioner offers this service. In this report we advise on ALL the options and explain them clearly. We advise on a course of action given the information you have given us ( the more information we have the better we can advise!)"

Just a quick note to say a big thank you to all the staff at KSA, our CVA was passed today by creditors voting in an overwhelming number including HMRC to accept the proposal as prepared by KSA.

The road to reach today’s conclusion has been bumpy, but at each stage your team has supported and guided us through the issues and we have reached a very satisfactory outcome to the benefit of customers, staff, all creditors and shareholders.